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Which of the following is a key focus in international trade negotiations regarding the service sector?
Which of the following is a key focus in international trade negotiations regarding the service sector?
Which of the following is an example of an international organization that promotes, monitors, and adjudicates international trade?
Which of the following is an example of an international organization that promotes, monitors, and adjudicates international trade?
The WTO framework is based on the concept of reciprocity, where countries lower trade barriers in response to others doing the same.
The WTO framework is based on the concept of reciprocity, where countries lower trade barriers in response to others doing the same.
True
What is the name of the trade agreement that replaced the GATT in 1995?
What is the name of the trade agreement that replaced the GATT in 1995?
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The [BLANK] is an association of producers or consumers, or both, formed to manipulate a product's price on the world market.
The [BLANK] is an association of producers or consumers, or both, formed to manipulate a product's price on the world market.
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What is the name of the most prominent cartel in the international economy?
What is the name of the most prominent cartel in the international economy?
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What is the main challenge to enforcing equal terms of trade in the global system?
What is the main challenge to enforcing equal terms of trade in the global system?
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Illicit trade primarily involves the trafficking of illegal goods and services across borders.
Illicit trade primarily involves the trafficking of illegal goods and services across borders.
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The WTO has been successful in its mission to eliminate trade barriers and ensure a level playing field for all countries.
The WTO has been successful in its mission to eliminate trade barriers and ensure a level playing field for all countries.
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What type of agreement aims to remove most trade barriers between two countries?
What type of agreement aims to remove most trade barriers between two countries?
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The European Union is considered the most important free trade area in the world.
The European Union is considered the most important free trade area in the world.
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What is the name of the trade agreement that was signed by the United States, Canada, and Mexico in 1994?
What is the name of the trade agreement that was signed by the United States, Canada, and Mexico in 1994?
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Which international agreement is often cited as a threat to the WTO as it could lead to a division of the world into competing trading blocs?
Which international agreement is often cited as a threat to the WTO as it could lead to a division of the world into competing trading blocs?
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In what year was the Southern Cone Common Market (MERCOSUR) established?
In what year was the Southern Cone Common Market (MERCOSUR) established?
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The Doha Round of the WTO negotiations was successful in reaching a comprehensive agreement on trade.
The Doha Round of the WTO negotiations was successful in reaching a comprehensive agreement on trade.
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What is the term used to describe a country's policy of self-reliance, avoiding or minimizing trade, and trying to produce everything it needs by itself?
What is the term used to describe a country's policy of self-reliance, avoiding or minimizing trade, and trying to produce everything it needs by itself?
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In general, trade policies that favor protectionism tend to benefit domestic industries, while free trade policies tend to benefit consumers.
In general, trade policies that favor protectionism tend to benefit domestic industries, while free trade policies tend to benefit consumers.
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What is the primary purpose of industrial policy?
What is the primary purpose of industrial policy?
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What is the term used to describe the sale of products in foreign markets at prices below the minimum level necessary to make a profit (or below the average cost of production)?
What is the term used to describe the sale of products in foreign markets at prices below the minimum level necessary to make a profit (or below the average cost of production)?
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Which of the following is NOT a common tool used by governments to implement protectionist trade policies?
Which of the following is NOT a common tool used by governments to implement protectionist trade policies?
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The concept of comparative advantage suggests that states should specialize in producing goods that they can produce with the highest relative efficiency and at the lowest relative cost.
The concept of comparative advantage suggests that states should specialize in producing goods that they can produce with the highest relative efficiency and at the lowest relative cost.
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According to the concept of mercantilism, states prioritize absolute economic gains over relative gains.
According to the concept of mercantilism, states prioritize absolute economic gains over relative gains.
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The WTO's Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement is considered less stringent than the World Intellectual Property Organization (WIPO) safeguards.
The WTO's Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement is considered less stringent than the World Intellectual Property Organization (WIPO) safeguards.
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What is the main argument made by environmental groups against unrestricted trade expansion?
What is the main argument made by environmental groups against unrestricted trade expansion?
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What is the main argument made by those who support free trade?
What is the main argument made by those who support free trade?
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What is the main reason why illicit trade persists even with government restrictions?
What is the main reason why illicit trade persists even with government restrictions?
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Which of the following is NOT a common response to unfair trade practices by states?
Which of the following is NOT a common response to unfair trade practices by states?
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The WTO's dispute settlement mechanism allows states to retaliate if they believe another state's trade policies are unfair, but the retaliation must be in the same sector as the original violation.
The WTO's dispute settlement mechanism allows states to retaliate if they believe another state's trade policies are unfair, but the retaliation must be in the same sector as the original violation.
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Study Notes
International Trade Theories
- International trade accounts for one-sixth of global economic activity, exceeding $21 trillion annually. This volume is much larger than global military spending.
- Trade's role varies by nation, but it's equally influential in industrialized and developing countries. The global south accounts for a smaller percentage of trade (approx. 40% of global trade).
- Trade is both economic and political, crossing state borders and influenced by various interest groups through trade regimes.
Liberalism and Mercantilism
- Mercantilism, akin to realism, prioritizes state interests over collective gains. Mercantilists view economic transactions as crucial for military power, believing that wealth directly correlates with power.
- Liberalism emphasizes absolute gains, advocating for free markets, free trade, and minimal government intervention, aiming to foster wealth and global peace. Liberal theories view interdependence as beneficial to prosperity and peace.
Economic Liberalism
- Economic liberalism emphasizes absolute gains in the context of international relations. The condition of international anarchy does not necessitate a rejection of extensive cooperation, in contrast with mercantilism. This approach stresses the importance of free markets, free trade, and capital flows.
- Liberals prioritize the growth of absolute wealth over relative gains between states and believe that an open international economy leads to widespread economic prosperity and peace.
Economic Liberalism: Principles, Concepts, and Factors
- Liberals focus on wealth creation and economic efficiency, emphasizing maximizing overall well-being and minimizing waste through optimizing resource allocation.
- Economic exchange in a liberal system creates interdependence and promotes peace.
- The market principle is critical for determining exchange rates and prices, with minimal government interference.
Market Imperfections and Political Interference
- Market imperfections, such as monopolies, oligopolies, corruption, and political interference (like tariffs and subsidies) can distort economic exchanges leading to reduced efficiency.
- International trade, unlike domestic market exchanges, occurs without a global governing body, and thus politics influences trade prices and interactions.
Sanctions
- Sanctions are a substantial aspect of political interference in free markets, restricting economic interactions due to differing political and/or economic views.
- Sanctions are often employed by states either to exert pressure or to express disapproval over some actions.
Comparative Advantage
- Comparative advantage, a core principle of trade theory championed by Adam Smith and David Ricardo, suggests that states/countries should specialize in producing goods they can create at a lower opportunity cost relative to other goods.
- Comparative advantage is enhanced through specialization of production, resulting in increased efficiency and broader gains for all participating countries, which are also improved with reduced transaction and transport costs.
Globalization and Trade Regimes
- The World Trade Organization (WTO) acts as an international trade body managing trade relations. The WTO has replaced the GATT.
- Regional free trade areas, involving neighbouring countries' agreements to reduce trade barriers, have grown in importance, as has bilateral trade between countries.
Industrial Policy and State Intervention
- States often utilize industrial policy, promoting specific industries' growth or intervention to protect them from foreign competition.
- Protecting domestic industries through industrial policy arises due to political pressures and market demands from interested parties. Such policies or intervention are often contested by external and domestic actors.
Intellectual Property Rights and Trade
- Intellectual property, often connected to trade negotiations, such as copyright, patents, and trademarks, are key concerns in trade relations.
- The use of international mechanisms to address or resolve intellectual property violations is often complex.
Cartels (OPEC)
- OPEC is a notable cartel that significantly affects global oil prices through influence on supply.
- OPEC, though not a monopoly, strongly influences global oil markets due to its significant control over oil reserves.
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Description
Explore the complexities of international trade theories, focusing on the contrasting views of liberalism and mercantilism. Understand the economic and political implications of trade, its impact on both industrialized and developing nations, and the role of various interest groups. This quiz will enhance your understanding of global trade dynamics.
